Britain still leads critical financial reform talks

Readers could be forgiven for thinking financial services reform has, in 2012,
focused on little other than bonuses or uncertainty in the eurozone. And,
judging by a quick glance at the headlines, they would be right.

It is testament to the importance of this legislation that, in January, the Chancellor intervened in negotiations during a meeting with his European counterparts.Photo: AFP

By Mark Hoban, Financial Secretary to the Treasury

7:30PM GMT 19 Feb 2012

But behind the scenes we are working hard to agree a framework with other European countries that addresses the failings of the crisis, safeguards financial stability, enhances competition and promotes growth.

I believe that getting this framework right is vital not just for the future of the UK's financial services sector but also to protect British taxpayers in the event of another financial crisis.

Reaching agreement on complex issues across 27 member states is seldom easy, but much progress has been made. Two weeks ago, for example, the EU reached an important agreement on derivatives regulation.

And while it may have received little fanfare, its implications were far reaching and will have a substantial impact on ensuring that these trades are handled in such a way that reduces risk to the financial system.

Why does this matter? In the boom years a lack of understanding about derivatives and their risks directly contributed to a financial crisis that cost tens of thousands of jobs and billions in taxpayer bailouts.

But used in the right way, derivatives help provide stability for consumers and businesses alike by reducing uncertainty on anything from oil prices to interest rates.

Furthermore, London remains one of the leading global centres for derivatives trading. Thousands of UK jobs depend on these products, so reforms will protect the taxpayer and support this vital part of our financial services sector.

It is testament to the importance of this legislation that, in January, the Chancellor intervened in negotiations during a meeting with European counterparts. That the UK's arguments were supported by a number of other member states is a credit to our belief in evidence-based policy-making and a detailed understanding of these technical issues.

In the end, the UK worked hard to successfully oppose vested interests in the EU and secured reform which upholds the principles of the single market, vital in promoting growth and creating jobs.

What was agreed flies in the face of those who see the UK as now being on the fringes of European policy-making. It clearly demonstrated that Britain continues to shape the debate, secure strong results in Europe on critical financial services issues and defend the single market.

Others like to spread a myth that the UK is attempting to "water down" European regulatory proposals, but this is simply not true. We have consistently argued that banking regulation must fully implement what has been agreed at the G20 level, and for new minimum standards to be applied across jurisdictions to ensure a level playing field. Indeed, we are fighting hard to ensure that the EC and some member states do not dilute the agreement.

While we support what has been agreed to date, there remains much work to do. The stakes are high – financial services employ more than 6m people across the EU and nearly 2m people in the UK alone, and are hugely important for UK taxpayers. These debates will shape Europe's financial services sector and its economy.

Of course, this reform takes place against the backdrop of international economic uncertainty. So, at this vital time, it remains important that we can continue to have confidence and trust in EU institutions, particularly the EC, to stand up for the single market and global co-operation.

This is not a time to turn inwards, but there are signs that some would impose barriers that could limit the flow of investment into the EU and close down opportunities for our pension funds to invest outside the EU.

We and like-minded member states oppose these trends because they risk undermining European growth and jobs at a time when significant volumes of international capital are required to boost the European economy.

"Fortress Europe" will not solve the sovereign debt crisis, nor will it support businesses or create jobs. We must play to our strengths.